OPINION: Shifting the Blame

The governor's proposal to shift teacher pension costs from the state to the county could have far-reaching negative effects.

Gov. Martin O’Malley, as part of an incredibly ambitious (hubristic?) legislative session, has proposed shifting the burden of teacher pensions from the state to the counties, a move that has been vigorously opposed by most local governments, led by Howard’s own Ken Ulman.

Initial reaction from people I’ve spoken to has been muted, if they’re even aware of the issue. Attentions are shifted by a proposed gas tax and same-sex marriage bill and this issue is sneaking by, despite the direct and long-term impact it could have on both your wallet and your children’s education.

The simple fact is that a teacher pension shift will have immediate and far-reaching impact on everything from local police patrols to the ability of the school system to attract and retain the excellent teachers the system relies upon. However, the details of the pension shift, to say nothing of Maryland’s budgetary oddities, are perilously wonky, allowing politicians, media outlets and citizens to make sweeping generalities of dubious factuality. A few facts for your consideration:

  • Maryland, the state, has funded teacher pensions for eight decades.
  • Maryland, the state, has mandated the current costs of the pensions, and retains considerable control over what we consider to be “local” Boards of Education. Those boards, by the by, negotiate teacher contracts. The boards, by the by, would not be on the hook to help pay for pensions.
  • Although county money flows to the Boards of Education, the amount the county has to fork over is, in effect, mandated by the state thanks to Maintenance of Effort (MOE) requirements. (More on that later.)
  • The shift, as currently structured, takes pension costs away from the incumbent payer (i.e., the state) which has mismanaged the program into its current condition, and forces said ill-managed plans down to the organizations with the most stretched resources and least ability to effect any kind of change in the driving costs (i.e., the counties), while continuing to burden that entity with potentially ruinous requirements from above (i.e., MOE).

To recap: The state makes a hash out of teacher pensions, decides to pass the cost on to the counties, without sharing the load with the Boards of Education that “own” teacher contracts and consume two-thirds of the Howard County budget.

How does that make sense?

(A note on MOE: The Maryland state government imposes strict guidelines on county spending on education, particularly the “maintenance of effort” requirement that forces year-to-year funding of education to remain the same on a per-pupil basis. In effect, this means counties with growing populations—like Howard—must continually, and endlessly, increase educational funding. The MOE requirement could best be characterized as a blunt instrument. It doesn’t allow for reducing inefficiencies, removing overlap or reforming bureaucracy in order to gain funding wiggle room. Throw more money at the situation, the state says, or you’re wrong. It’s completely binary, and decades after its enactment, resulted in a school system that gets great results at an extraordinarily high cost, with swollen bureaucracy and literally no motivation to reduce spending. Funding is required, by law, to go up!)

Even more worrisome, no one in this debate has found cause to worry about the potential effect on teachers. Currently, teachers are literally forced to contribute 7 percent of their earnings to the pension fund. If the shift occurs, I think it likely that these mandated contributions will continue to go up as cash-strapped counties struggle to fulfill their obligations. After all, the easiest place to find more money is via employee contributions. If the contributions rise to be in the 9–10 percent range, teachers will be effectively saving for retirement in a vehicle that no sensible financial advisor would point you toward. Combined with the social security withholdings Maryland teachers also have to contribute, 17 percent of already low salaries could be gone into a system that has proven it can’t outcompete your average 401k and stands on dubious fiduciary grounds. But teachers aren’t allowed to opt out. (And if you believe teacher pensions are some magical source of Romneyesque retirements, I invite you to play with the online pension calculator. You may be surprised.)

Current teachers enjoy a good retirement to be sure, but as contributions go up (and salaries remain stagnant), the benefit of long-term teaching in a county becomes less and less. After all, if you work in the private sector, no one tells you to give up a portion of your salary, or mandates that you help workers who came before to retire. You’re not forced to plan for your future, no matter how detrimental that may be to society down the road. Teachers, though, are told to give up larger and larger percentages of their paychecks into a political pinball machine, with no way out. In fact, O’Malley’s personal staff members don’t even have to deal with the same Byzantine system as other state employees. From Maryland Administrative Release No. 21: “Only members of the General Assembly, officials of the Governor’s Office, and certain other public officials have the option of whether or not they want to join the systems.” Good enough for the teachers, not good enough for the Governor’s Office.

It’s possible that the situation may be so swiftly headed for disaster that only complete pension reform could save it. Everyone, from the taxpayer to the teachers’ unions to every level of government would need to come to the table and reach an equitable solution. Governor O’Malley, rather than facing this difficult challenge head-on, has instead chosen to pass the buck. And our counties, our local police and firefighters and teachers, those backbones of our communities, will bear the brunt of his dodge.

That is truly a nightmare.

MG42 February 23, 2012 at 12:46 AM
A well written piece that makes me hate government even more. Screw it, let's put the government in charge of healthcare!
Leslie Kornreich February 23, 2012 at 02:36 AM
The federal government saw the writing on the wall about the un-sustainability of their pension system many years ago and phased it out in favor of what is called the thrift savings plan. Every month employees' contributions are matched (up to 5% of their salary) by a contribution by their employer (the federal government). That money belongs to the employee and the thrift savings plan manages the investments, at very low cost, until retirement, when the employee draws income from the fund. Under the thrift savings plan, the government has no unpaid liability when the employee retires. For teachers, TIAA-CREF already runs a similar defined contribution retirement fund in many other places so that the state would not have to create or manage its own employees' investments.
Jack February 23, 2012 at 05:37 AM
It seems we have a difference of opinion between those who produce in the private sector and those who are paid through the taxes imposed upon them. One side has met the reality of the downturn while the other is determined to continue their stint at the feed trough until there is nothing left. There needs to be a new strategy if we are all to be able to continue on. I would look at education as a driving force. We can gut the administration both in the number of employees and the amount we pay them. We can supplement the system by providing access to the public and tapping the intellectual wealth of the community. Demand more from all employees. Lastly, what do we need unions for? We need to take the cap off the source of education, any person who sits through 13 years of school and 4 years of college should be qualified to teach what they have learned and if they are not qualified then our "teachers" have failed them. In this economy our college graduates can not find jobs and would teach for $10 per hour without benefits. At this price we could hire teaching teams for each class room for less then a union teacher and probably increase productivity. Well the union is right, you can not live off of $10 per hour however this is the reality of the economy and the product of a union teacher, our graduates, should not expect to be sent into the world with little hope of making the same amount as those who prepared them.
Jack February 23, 2012 at 05:58 AM
Retirement is such an unnatural situation, what being on the planet other then man can just stop and expect the rest of the world to carry the burden. We all have a very narrow view of the world. Because the last 100 years or so has brought us to this point has very little to do with the future of humanity. With the demands of the number of people in the world we have reached capacity. Either everyone works or many suffer and this is the reality. Education is our salvation however the way we educate our children must change. There is no longer room for profit in education as our situation in the world has substantially changed. Education is a necesity, increasingly the future of mankind will depend on the amount, quality and advances in education. The goal of education must become bringing the future into the present at a pace which allows us quality of life. There is no room for the stifling bureaucracies or the unions.


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